In a decision that touches on the boundaries of consumer protection in Ghana’s sale of goods regime, the Supreme Court of Ghana has reaffirmed the principle that a seller cannot pass off a defective or refurbished product as new and escape liability simply because the buyer used the product for some time.
The case of Fafape Ama Etsa Foe & Anor v Z-Auto Trade Ghana Ltd & Anor takes us on a detailed judicial excursion on the implied terms under the Sale of Goods Act, 1962 (Act 137), the law on acceptance, the passing of title, and the legal consequences of misrepresentation in commercial transactions.
Background to the Dispute
The plaintiffs purchased what was represented to be a brand new Toyota Land Cruiser Station Wagon from the defendant company, Z-Auto Trade Ghana Ltd, for GH¢465,750 (the cedi equivalent of USD 15,000). The vehicle was said to carry a warranty for three years or 100,000 kilometres, whichever came first.
The transaction was troubled from the outset. Five days after payment, the Plaintiffs were invited to collect the vehicle, yet the title documents were not ready. Eight months would pass before those documents were eventually delivered, and when they arrived, it emerged that the vehicle had previously been registered in the name of the 2nd Defendant, Josephine Monnie, a fact that had never been disclosed to the Plaintiffs.
Within the first week of use, the vehicle began emitting thick, heavy black smoke from the engine. The Defendants were promptly notified. Assurances were given that the smoke would clear with time. It did not. By the time the vehicle had covered 18,000 kilometres, the problem had worsened. The Plaintiffs eventually returned the vehicle on 22nd March 2016. Assessments conducted by the Defendants’ own mechanic and a state entity confirmed that the engine was refurbished, not new.
Despite the Defendants’ attempts to remedy the situation, the defects persisted and demands went unmet. The matter was even reported to the Police before the Plaintiffs ultimately commenced an action at the High Court, claiming breach of contract and damages.
High Court
The High Court found that the Defendants had breached the contract by supplying a defective vehicle with a refurbished engine. It ordered replacement of the engine, awarded GH¢20,000 in general damages, and granted partial compensation for rental expenses covering four of the nine months claimed, on the basis that the Plaintiffs had a duty to mitigate their loss.
Court of Appeal
Both parties appealed. The Court of Appeal delivered two separate judgments. In the more consequential of the two, authored by Kyei Baffour JA (with Bartels-Kodwo JA concurring), the Court upheld the 1st Defendant’s appeal and reversed the decision of the High Court. It held that the Plaintiffs had kept and used the vehicle for approximately ten months, and that this amounted to acceptance in law. On that basis, the Defendants were absolved of liability, and the Plaintiffs’ own appeal was dismissed.
Supreme Court
The Supreme Court disagreed and restored the essence of the High Court’s findings, with enhanced remedies.
Before reaching the merits, the Court addressed a procedural matter of importance to practitioners. Two of the Plaintiffs’ grounds of appeal were struck out for non-compliance with Rules 6(4) and (5) of the Supreme Court Rules, C.I. 16, which require that grounds alleging error in law must identify the specific error with particularity. Vague or general grounds not meeting this standard are liable to be struck out. The Court nonetheless proceeded on the omnibus ground that the judgment was against the weight of evidence, which, by established principle, opens the entire record for fresh evaluation of both fact and law.
The Supreme Court identified two central questions:
1. Whether the vehicle supplied met the contractual description and purpose.
2. Whether the Plaintiffs’ delay in returning the vehicle amounted to acceptance.
Implied Conditions and Fitness for Purpose
A major pillar of the Court’s reasoning was Section 13 of Act 137, which implies into every contract of sale that goods must be free from undisclosed defects and reasonably fit for their intended purpose. The Court also recalled that Sections 9 to 14 of Act 137 imply mandatory terms into every contract for the sale of goods, covering matters from correspondence with description to fitness for purpose.
The Court found clear evidence that the vehicle did not meet these standards. Selling a vehicle with a refurbished engine under the guise of a brand new one amounted to a breach of a fundamental condition of the contract, not merely a warranty. The distinction matters: breach of a condition entitles the innocent party to rescind the contract and sue for damages, whereas breach of a warranty only results in damages.
The Defendants’ argument that they had given no express warranty was rejected as inconsequential. By the custom and trade of the business of dealing in brand new vehicles, an implied condition arose that the vehicle sold would be exactly what it was represented to be. The Court emphasised that Ghana’s law has shifted from the traditional caveat emptor (buyer beware) to a more protective stance of caveat venditor (the seller must be aware of and stand behind the goods being sold).
Misrepresentation, Fraud, and the Passing of Title
The Court went further to characterise the transaction as involving misrepresentation bordering on fraud. The Defendants had failed to disclose the prior registration of the vehicle in the 2nd Defendant’s name and had concealed the true condition of the engine. Relying on settled authority from Frimpong v Nyarko [1998-99], the Court reiterated the principle that fraud vitiates everything, and that once fraud is established, a court is duty-bound to unravel whatever was done in its strength.
The Court held, unequivocally, that title in the vehicle had never passed to the Plaintiffs. Title would only have passed if the vehicle had met the specification and purpose for which it was acquired. Since the Defendants delivered a refurbished vehicle camouflaged as brand new (a breach of a fundamental term), the conditions necessary for title to pass were never fulfilled. A seller who deceives a buyer about the nature of goods cannot later rely on the passage of title and risk to defeat the buyer’s claim.
Acceptance vs. Rejection: A Clarification
The Court of Appeal had relied on Pyne & Associates v African Motors and Rockson v Armah [1975] 2 GLR 116 to hold that keeping the vehicle for approximately ten months amounted to acceptance, after which the right to reject was lost. The Supreme Court rejected this reasoning, and distinguished both cases on their facts.
In Pyne & Associates, the buyer had retained the vehicle for nearly a year without any overlay of fraud or concealment. The present case was materially different. Here, the Plaintiffs had reported the defect within the very first week of purchase. The Defendants had been notified, had made attempts to repair the vehicle, and had directed that it be sent to their own mechanic. A dispute even extended to the Police station before litigation commenced. In these circumstances, continued possession did not amount to acceptance, it reflected the Plaintiffs’ reasonable response to the Defendants’ own conduct and assurances.
The Court held that the Plaintiffs had never “accepted” the defective vehicle in the legal sense, and that acceptance must be assessed in context, not merely by the passage of time. This is an important clarification. The use of defective goods does not automatically extinguish the right to reject, especially where the seller is aware of the defect and is attempting repairs.
Remedies Granted
The Supreme Court allowed the appeal, set aside the Court of Appeal judgment, and made the following orders:
Replacement of the engine with a brand new one, or payment of its monetary replacement value, within three months.
Special damages of USD 3,000 per month for four months, totalling USD 12,000, payable within seven days and attracting simple interest thereafter.
General damages of GH¢75,000.
Costs of GH¢50,000.
The judgment reinforces statutory protections under Act 137 and places a clear burden on sellers to ensure that goods match their description and are fit for purpose. The Court adopts a more nuanced approach, recognising that acceptance must be assessed in context and not merely by the passage of time.
Title Does Not Pass on a Defective Sale, where a seller breaches a fundamental condition, the transaction remains legally incomplete, regardless of physical delivery or usage.
For buyers, the decision offers reassurance that the law will intervene where goods fail to meet promised standards, and that prompt notification of defects, followed by good faith engagement, will not be treated as passive acceptance. For sellers, it is a caution that compliance with statutory obligations is not optional, and that misrepresentation may carry consequences no length of usage by the buyer can cure.
